Insurance Claims and Legal Principles : Supreme Court Explains Crucial Legal Issues
If a fact, although material, is one which the proposer did not and could not in the circumstances have been expected to know, or if its materiality would not have been apparent to a reasonable man, his failure to disclose it is not a breach of his duty. The proposer need not disclose matters already known to the insurer or matters as to which the insurer has waived information. An insurer is deemed to know of matters of common knowledge and matters of which he ought to be aware as an insurer in that line of business. [Halsbury’s Laws of England, Fourth Edition, Reissued 2003, Volume 25, Page 39, paragraph 41.]
Further, if the insurer while accepting the proposal form does not ask the insured to clarify any ambiguities then the insurer after accepting the premium cannot urge that there was a wrong declaration made by the insured.
An exclusion clause in the policy is to be construed in a manner that it does not defeat the main purpose of the contract and could even be read down to serve the main purpose of the policy that is to indemnify the policy holder.
Moreover, an accident may occur on account of latent or nondetectable defects. Duty to disclose is dependent on knowledge of the proposer as also on the nature of disclosure sought. If the law does not specify a boiler’s life, or life of its parts, and disclosure is not sought regarding the age of the boiler or its parts, there may be no corresponding duty to disclose. Further, a latent or non-detectable defect may not be in the knowledge of the proposer.
Once a proposal is accepted by the insurer and formalities are complete, in absence of plea and evidence of fraud or misrepresentation making the contract voidable at the instance of the insurer, the insurer cannot be permitted to wriggle out of its liability under the contract.
For more details refer KOPARGAON SAHAKARI SAKHAR KARKHANA LTD v NICL [2025] GCtR 1707 (SC).
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